American Economic Review Vol. 110 No. 12 2020
Missing Events in Event Studies: Identifying the Effects of Partially Measured News Surprises
Abstract
Macroeconomic news announcements are elaborate and multidimensional. We consider a framework in which jumps in asset prices around announcements reflect both the response to observed surprises in headline numbers and to latent factors, reflecting other news in the release. Non-headline news, for which there are no expectations surveys, is unobservable to the econometrician but nonetheless elicits a market response. We estimate the model by the Kalman filter, which efficiently combines OLS and heteroskedasticity-based event study estimators in one step. With the inclusion of a single latent surprise factor, essentially all yield curve variance in event windows are explained by news.
- DOI
- 10.1257/aer.20181470
- Volume
- 110
- Issue
- 12
- Pages
- 3871-3912
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref